DRB-Hicom revenue up 29.4% in H1 2021, y-o-y losses halved – Proton behind the improved performance

DRB-Hicom has revealed its Q2 2021 and H1 2021 results and it shows improvements. In the three months till June 30, revenue went up by 30.8% year-on-year to RM2.62 billion. For the first half of the year, revenue rose 29.4% against the same period in 2020, to RM6.13 billion.

Losses before tax narrowed too. Q2 21 losses were RM279.53 million, while the pre-tax loss for H1 21 was RM243.22 million. This is a big improvement from the RM365.80 million and RM511.11 million losses in Q2 and H1 2020, respectively.

DRB-Hicom majors on the automotive sector and is linked with the fortunes of the industry. The conglomerate’s auto sector’s revenue for H1 21 rose 52% y-o-y to RM4.35 billion; this was largely due to sales by national automotive company Proton as well as other marques under its umbrella such as Honda, Mitsubishi, Volkswagen, Tata and Isuzu. The latter’s new third-gen D-Max is off to a great start.

Other contributors to the cause are manufacturing and engineering companies such as PHN Industry and Hicom-Teck See Manufacturing Malaysia. Q2 21 revenue came in at RM1.78 billion, up 68% year-on-year.

The Malaysian automotive industry has been badly affected by the lockdowns imposed to curb Covid-19. DRB says that the prolonged MCO is expected to impact full year sales as showrooms remain closed in some states despite the recent reopening of some economic sectors.

The company says that while its Hicom Automotive Complex in Pekan has obtained permission to operate as Pahang moved into Phase 2 of the National Recovery Plan (PPN), vendors and suppliers based in the Klang Valley remained closed, halting component supply.

Moving forward, DRB-Hicom notes that the Malaysian Automotive Association (MAA) has revised downwards its target total industry volume (TIV) for Malaysia by 12% this year, from 570,000 to 500,000 units. On a macro level, Bank Negara Malaysia has revised the full year GDP growth forecast to between 3% to 4%, lower than previously estimated.

On the brighter side, various policy support packages introduced by the government, alongside rapid progress of national vaccination programme, is “expected to provide sustenance towards growth recovery in the near future”.

The group notes that the government’s decision to extend sales tax exemption for passenger vehicles until December 31 is expected to lift overall demand for this year.

“For the remainder of 2021, the group is taking necessary steps to reshape its business to remain competitive in an unpredictable environment,” it said, adding that it “remains cautious of its financial performance” for the full year, given the heightened uncertainties over the full economic impact of the prolonged pandemic.

The automotive sector is the backbone of DRB-Hicom’s business. The other sectors that the group has a hand in are defence, aerospace, banking, services (Pos Malaysia is a main contributor here, H1 21 revenue down 9% to RM791.83 million) and property – these other subsidiaries will continue to focus on prudent cash management to stay afloat, the conglomerate says. DRB exited the retail property and hospitality business in December 2020.

The group recorded a profit before tax of RM540.1 million in 2020 on the back of RM13.2 billion revenue.

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